Saturday, January 3, 2009

Silver is one of the chemical elements. Silver’s chemical symbol is Ag (Gold’s symbols is Au) and its atomic number is 49 (Gold’s is 79). Silver sits directly above Gold in the Periodic Table of the Elements as its electronic structure is similar. Therefore Silver has similar characteristics to Gold. Silver is relatively inert and malleable. Unlike Gold, Silver does tarnish. The best way to clean silver is with mild soap and warm water and then pat dry with a soft cloth. Chemical cleaners such as “silver polish” are completely unnecessary.

Silver is both an Industrial Metal and a Precious Metal. As an industrial metal Silver has many thousands of uses due to its outstanding qualities. Silver has the highest electrical and thermal conductivity of any element. Silver was critical to the photographic industry before digital cameras came along. The term “Silver Screen” refers to the fact that Silver was actually embedded into the screens in the early movie theaters. Silver even kills bacteria and is used in water filters for that purpose. New uses of Silver are found almost daily.

As a precious metal for money Silver has no equal in its widespread use. Silver coins are among the oldest examples of coined money. Gold is too valuable for everyday common use historically being worth sixteen times Silver. Silver prices are quoted in Troy Ounces. Silver futures contracts are traded on the COMEX in New York and on the London Metal Exchange. The Spot Price is published by the exchanges and is derived from the futures prices.

COMEX Silver futures contracts are for 5000 ounces cast into 1000 ounce bars. The vast majority of the activity on the COMEX is done by “traders” trying to make money on price fluctuation. The price of Silver set by the COMEX differs greatly from the Silver price paid by individuals for small amounts of Silver coins or bars. There is a big difference in that these small individual transactions involve real physical Silver – not paper contracts on an exchange. Thus, the Silver price for small amounts can be as much as 100% over the COMEX price. In times of economic uncertainty Silver can be very difficult to get as Silver is the money of the common person.

Another thing to keep in mind is the historical ratio between the Gold price and the Silver price. Over the long term one ounce of Gold is worth sixteen times that of one ounce of Silver. When the Gold/Silver ratio gets far from sixteen you expect a return to the mean. Silver price moves can be very volatile.

Everything that was said about how to think about owning Gold is true of Silver. Silver is insurance. Persons of modest means should make Silver their first priority. Silver is the money of everyday transactions. One ounce bullion coins and ten ounce bars are most convenient. In terms of one’s overall precious metals holding thirty to forty percent should be in silver.